Candidates’ PerformanceCandidates’ Performancein the 2009 Examination – Paper 1in the 2009 Examination – Paper 1
Mr. WAN Shiu-keeMr. WAN Shiu-kee
2
Overall PerformanceOverall Performance
Satisfactory Possess broad understanding of the
topics Able to give appropriate answers
based on the scenarios given
3
Overall PerformanceOverall Performance
Should read the questions carefully Should present their answers in a logical
and systematic manner Abbreviations are not acceptable Proper heading / title should be provided
for each account / statement Journal narratives should not be omitted Should show workings in their answers
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Overall PerformanceOverall Performance
Questions Popularity Performance
1Satisfactorily answered
2 Good
3 96.0% Well answered
4 35.7% Poor
5 68.3% Well answered
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Question 1 – Consolidated Question 1 – Consolidated financial statementsfinancial statements
Satisfactorily answered Well prepared for a question on
consolidated financial statements
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Question 1 – Consolidated Question 1 – Consolidated financial statementsfinancial statements
a) Poor Not able to explain the accounting
definition of goodwill in the context of consolidation
Wrongly focused on elaborating the difference between purchased goodwill and inherent goodwill
Did not understand the meaning of “attributing factors”
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Question 1 – Consolidated Question 1 – Consolidated financial statementsfinancial statements
b) Well answered Computation of goodwill should
include holding company’s share of ordinary share capital, share premium, pre-acquisition profits and fair value adjustments on office premises
Did not net off the pre-acquisition dividend from the cost of investment
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Question 1 – Consolidated Question 1 – Consolidated financial statementsfinancial statements
c) Not familiar with the adjustments relating to intra-group transactions
Mistakenly treated the mark-up as gross profit margin overstatement of cost of goods sold and understatement of gross profit
Could not identify the adjustments to be made to depreciation expenses depreciation on profit of the transferred machinery should be excluded, additional depreciation should be computed basing on the fair value adjustment of the office premises
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Question 1 – Consolidated Question 1 – Consolidated financial statementsfinancial statements
Failed to exclude intra-group management fees from administrative expenses
No difficulty in calculating goodwill arising from consolidation, but not familiar with the treatment of impairment loss on goodwill
Profit attributable to the equity holders of the parent and minority interest were to be shown separately
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Question 1 – Consolidated Question 1 – Consolidated financial statementsfinancial statements
Amounts of unrealised profit adjustment arising from upstream sale of machinery and additional depreciation on revaluation of office premises were to be apportioned to minority interest
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Question 1 – Consolidated Question 1 – Consolidated financial statementsfinancial statements
Should present the consolidated balance sheet in vertical form and classify various items under the appropriate headings
Did not adjust the net book value of PPE with the amounts of unrealised profits on machinery, fair value adjustments on office premises and the related depreciation
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Question 1 – Consolidated Question 1 – Consolidated financial statementsfinancial statements
Cash in transit should be shown neither as a separate item nor as a reduction of bank overdraft
Failed to deduct 2 years’ additional depreciation on fair value adjustment from retained profits
Ignored the depreciation adjustment on the transferred machinery from retained profits
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Question 2 – Partnership Question 2 – Partnership accountsaccounts
Good Quite familiar with the preparation of
various accounts for a partnership
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Question 2 – Partnership Question 2 – Partnership accountsaccounts
a) Confused the treatments of debit notes and credit notes
Rule of the lower of cost or net realisable value (LCN rule) should be applied to the valuation of closing inventories
Not aware that insurance expenses had been included in selling and administrative expenses
Wrongly calculated the allowance for doubtful debts basing on “confirmations received from trade debtors”
Returned cheques should be added to the balance of trade debtors
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Question 2 – Partnership Question 2 – Partnership accountsaccounts
b) Remember that no goodwill account was to be maintained in the books GW should be written off through partners’ capital accounts
No difficulty in recording the drawings of the partners but the full amount of the partners’ salaries had been credited to the capital accounts
Share of profits should be calculated after taking away the partners’ salaries from the net profit before appropriation
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Question 2 – Partnership Question 2 – Partnership accountsaccounts
c) Should transfer the book values of various assets to the realisation account failed to show the net amount of trade debtors and forgot to include the prepaid portion of the insurance expenses
Could not record the correct payment to trade creditors in the bank account
Ignored the share of realisation profits in recording the final settlement to the partners
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Question 2 – Partnership Question 2 – Partnership accountsaccounts
d) No difficulty in preparing the required journal entries
Mistakenly recorded the assets in the books of A&B Ltd at book values
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Question 3 – Cash flow Question 3 – Cash flow statementstatement
Well answered Demonstrated an acceptable level of
understanding in preparing a cash flow statement
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Question 3 – Cash flow Question 3 – Cash flow statementstatement
a) Not able to calculate the correct amounts of the depreciation of machinery and equipment as well as profit before taxation
Not aware that short-term investment was listed at fair value wrongly computed the profit on sale of investment
Had difficulties in calculating the valuation surplus on short-term investments for adjustment to net cash flows from operating activities
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Question 3 – Cash flow Question 3 – Cash flow statementstatement
Should classify interest paid as an operating activity and dividend income as an investing activity
Wrongly disclosed increase in fixed deposit as a cash flow from investing activities
Should not divide the proceeds from issuance of ordinary shares into par value and share premium and disclosed separately
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Question 3 – Cash flow Question 3 – Cash flow statementstatement
Did not notice the repayment in 2008 and the re-classification of bank loan at the end of 2007 and 2008
Fixed deposit with a maturity of 6-months was not to be treated as cash equivalents
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Question 3 – Cash flow Question 3 – Cash flow statementstatement
b) Fair Could not manage to explain 2
advantages of a cash flow statement to investors focused on stating the uses and classifications of a cash flow statement
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Question 4 – Ratios and ErrorsQuestion 4 – Ratios and Errors
Poor Could not apply conceptual
understanding in solving various accounting problems
Did not posses sufficient knowledge of some specific issues related to lease, provisions and intangible assets, etc
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Question 4 – Ratios and ErrorsQuestion 4 – Ratios and Errors
a) Could not calculate the return on equity and return on capital employed correctly wrongly used average profit figure instead of averages for equity and capital employed
Failed to include issued debenture in calculating opening figure for equity
Did not adjust debenture interest to net profit in computing return on capital employed
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Question 4 – Ratios and ErrorsQuestion 4 – Ratios and Errors
b) Gave comments only on the gearing ratio without giving proper reference to their answers in (a)
Failed to explain the implications of return on equity and return on capital employed to the shareholders of a highly geared company
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Question 4 – Ratios and ErrorsQuestion 4 – Ratios and Errors
c) Did not understand how to apply the concept of “substance over form” in the question tended to list the criteria of a lease as their answers
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Question 4 – Ratios and ErrorsQuestion 4 – Ratios and Errors
d) Not aware that the books had been closed recorded omissions and corrections directly to various expenses instead of profit and loss account
Had difficulty in calculating the amounts of lease creditors and finance charge for the year
Not able to prepare the necessary journal entries to recorded the lease
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Question 4 – Ratios and ErrorsQuestion 4 – Ratios and Errors
Should not record the construction cost of the fire exits as a liability
Failed to apply the matching principle to deal with the non-refundable rental premium and the accrued rent at the end of year 2008
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Question 5 – Non-profit making Question 5 – Non-profit making organisationorganisation
Well-answered Could identify the items to be shown
in the income and expenditure account and balance sheet
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Question 5 – Non-profit making Question 5 – Non-profit making organisationorganisation
a) Did not know how to work out the cost of goods sold from sales to star plan members mistakenly treated the margin as the mark-up in arriving at total amount of cost of goods sold
Did not account for stock loss when calculating operating expenses
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Question 5 – Non-profit making Question 5 – Non-profit making organisationorganisation
b) Had difficulty in calculating income from subscription fees forgot to allocate the star plan members’ subscription fees over a period of 3 years
Failed to apply the realisation principle in calculating revenue from wine tasting courses
Did not include the deposits for the function room as an expense in computing profit from annual dinner
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Question 5 – Non-profit making Question 5 – Non-profit making organisationorganisation
c) Could not manage to split deferred subscription fees into current and non-current portions and show them correctly in the balance sheet
Deferred course fees for January and February 2009 should be disclosed as a current liability
Thank you !Thank you !